Britain’s leading airlines warn that passenger fares could increase due to government policy. Tim Alderslade, chief executive of Airlines UK, has sent a letter to Treasury minister Dan Tomlinson detailing his concerns around proposals to extend the Carbon Border Adjustment Mechanism.
What is the Carbon Border Adjustment Mechanism?
The Carbon Border Adjustment Mechanism (CBAM) is a carbon pricing policy which charges a fee on carbon intensive products, including aviation fuel, which are imported from other countries with weaker environmental rules. It ensures foreign imports cost roughly the same as goods made under strict domestic carbon laws. The UK is introducing its own domestic CBAM policy from Jan. 1st 2027, which will increase costs for airlines.
Planes are predominantly made from aluminium and steel alloys, which are both covered under CBAM. Majority of these products are imported from outside the EU. This means that aircraft manufacturers may soon be paying increased prices, passing them down through the supply chain to passengers. Airport infrastructure will also be affected, with jet bridges and terminal expansion projects requiring vast amounts of material.
In the letter, Alderslade allegedly stated that the UK relies on imports for a substantial proportion of jet fuel and Airlines UK’s members, including British Airways and Virgin Atlantic, are concerned it will place further costs on the sector.
The aviation industry is already facing increased fuel prices
The aviation industry is already facing increased fuel prices due to geopolitical tensions. Jet fuel prices have doubled since the beginning of the Iran war, as oil supplies have been restricted. Airports are facing shortages of fuel and airlines, such as Lufthansa and KLM have cancelled flights and reduced schedules to help with the rising costs. On Nov. 2, Ryanair chief executive Michael O’Leary said the airline plans to freeze pay, curb hiring and increase fares as it expects an extra £2 billion fuel bill in its next financial year.
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